Morningstar's Q2 Moat Rating Changes: 6 Stocks with Changes in Competitive Advantage Ratings

Morningstar analysts reassessed moat ratings for 847 US-listed stocks in Q2 2025, with 3 upgraded and 3 downgraded. The changes reflect a company's durable competitive advantages, with 216 stocks having wide moats, 348 having narrow moats, and 283 having no moat. Morningstar's economic moat rating is a key element in evaluating a company's long-term competitive advantage and its ability to generate excess returns on capital.

Morningstar analysts have reassessed the economic moat ratings of 847 US-listed stocks in the second quarter of 2025, with notable changes impacting 6 companies. Three stocks were upgraded, while three were downgraded, reflecting the companies' durable competitive advantages. This quarterly review underscores the importance of Morningstar's economic moat rating in evaluating a company's long-term competitive edge and ability to generate excess returns on capital.

Following the changes, 216 stocks have wide moats, 348 have narrow moats, and 283 have no moat. The wide moat category includes companies with strong, enduring competitive advantages that are expected to last at least 20 years. Narrow moats are assigned to companies that can fend off competition for 10-20 years, while no moat is given to companies without any competitive advantages [1].

The moat ratings are a critical component of Morningstar's stock-picking methodology, which has historically shown that stocks with moats have a greater chance of outperforming over the long term when combined with low valuations. However, these ratings are not reassigned frequently due to their long-term focus, but changes can occur based on fundamental shifts in a company's competitive landscape or assumptions made by analysts [1].

Among the stocks with moat rating changes, Centene and CVS Health saw their ratings downgraded to none from narrow, reflecting regulatory concerns and managed care updates, respectively. Conversely, Goldman Sachs Group, Interactive Brokers, WW Grainger, and International Flavors & Fragrances had their moat ratings upgraded to wide from narrow. These upgrades reflect a durable cost advantage, intangible assets, and other competitive factors [1].

The changes in moat ratings are part of a broader market trend, as the Morningstar Wide Moat Focus Index and the Morningstar US Small-Mid Cap Moat Focus Index also saw gains in June 2025, participating in the broader equity market rally. The technology sector, particularly wide-moat semiconductor companies like Microchip Technology, played a significant role in driving these gains [2].

These reassessments highlight the importance of regularly reviewing and updating moat ratings to reflect the evolving competitive landscape and long-term outlook of companies. Investors and financial professionals should consider these changes when evaluating their portfolios and making investment decisions.

References:
[1] https://www.morningstar.com/stocks/6-stocks-with-moat-rating-changes-q2
[2] https://www.vaneck.com/us/en/blogs/moat-investing/moat-stocks-advance-in-summer-rally/